Congress Approves Tax Legislation with Reduced Door, Window and Skylight Tax Credit for 2011

December 17th, 2010 by DWM Magazine

As expected, but to the disappointment of many in the industry, the U.S. House of Representatives passed the “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act” (H.R.4853) yesterday—but it does not include an extension of the $1,500 tax credit. Instead it calls for a $200 tax credit for windows.

Several associations, including the Window and Door Manufacturers Association (WDMA) and the American Architectural Manufacturers Association (AAMA), had been working for an extension of the current tax credit that will expire December 31.

“WDMA members and staff worked with Hill allies to attempt to restore the full value of the 25c credit to the current level of 30 percent up to $1,500, but unfortunately Congressional leadership did not allow for an open amendment process on the compromise tax measure which prevented our supporters from seeking an amendment restoring the current level,” says WDMA president Michael O’Brien. “While many members of Congress supported our efforts to preserve jobs and promote energy efficiency, they could not overcome the procedural roadblocks.”

AAMA president and chief executive officer Richard Walker told DWM magazine that this action will severely impact the industry.

“There is little doubt that yesterday’s Senate action that severely reduces the 25(c) window tax credit from $1,500 to $200 for energy-efficient upgrades will turn back the clock to 2008-09, unleashing the devastating domino effect during the height of the housing crisis,” he says.

“Homeowners who are currently caught in the crossfire of depreciated home values and a lagging economy will be unable to make these important energy-saving purchases without the assistance of any substantive incentive, and once again, as demand for fenestration products decline, manufacturers will be forced to slow production lines, shutter facilities and implement substantial cuts to their workforce,” he adds.

Walker says that the decision is especially concerning since “energy-efficient commercial and residential construction and retrofitting has often been touted by Congress as one of the key components to increasing employment in the severely depressed construction industry. With the added bonus of lowering consumer heating and cooling costs, the production and installation of energy-efficient fenestration products should be among the Senate’s highest priorities.”

Additional Key Provisions

Below is a brief summary of key provisions in the tax bill, as highlighted by the WDMA:

Estate Tax: The bill institutes a $5 million exemption (indexed beginning in 2012) and 35 percent rate on estates for 2011 and 2012. The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011. The proposal sets a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year.

Individual Tax Rates: Extends the 35 percent tax bracket for an additional two years.

Payroll Tax: A temporary 2 percent reduction in employee-paid Social Security payroll taxes for 2011.

Capital Gains & Dividends: Extends the current capital gains and dividends rates (15 percent for those in the 25 percent bracket and above) through 2012.

New Energy-Efficient Home Credit (45L): Extended through 2011 (lapsed after 2009).

Bonus Depreciation: The bill extends and temporarily increases the bonus depreciation provision for investments in new business equipment. For investments placed in service after September 8, 2010 and through December 31, 2011, the bill provides for 100 percent bonus depreciation. For investments placed in service after December 31, 2011, and through December 31, 2012, the bill provides for 50 percent bonus depreciation.

Section 179 Expensing: In 2007, tax cuts temporarily increased section 179 thresholds to $125,000 and $500,000 respectively, indexed for inflation. These amounts have been further increased and extended several times on a temporary basis, including most recently as part of the Small Business Jobs Act which increased the thresholds to $500,000 and $2,000,000 for the taxable years beginning in 2010 and 2011. This proposal extends the 2007 maximum amount and phase-out thresholds for taxable years beginning in 2012, at $125,000 and $500,000 respectively, indexed for inflation. The proposal is effective for taxable years beginning after December 31, 2011.

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